CPO
Chart 1, CPO, chart from 21/04/2009 to 08/10/2009.
As indicated by A, CPO reached 2799 level in May, and soon, it retreated 800 points, and found its support at 2000 level (as indicated by B). After being supported at the 2000 level, it rebounded strongly and in just a month, it has regained 500 points or 26%. However, it was resisted at 2500 level as indicated by C, and started falling again, while breaking below the 14, 21, 31 EMA, forming a downtrend.
As indicated by D, CPO is now testing the 2000 psychological support level, and if CPO could rebound from this level, it would benefit the plantation sector; however, if CPO should break below 2000 level, the downtrend of the CPO shall continue, and it will have negative effects towards plantation counters.
Case Studies on Plantation Counters:
IOICorp
Chart 2: IOI Corp – 1961, chart from 28/01/2009 to 08/10/2009.
As shown on chart 2, since the rebounding from its lowest point in October 2998, price of IOI formed a long term uptrend line (T1); until now, the uptrend is still intact. However, price of IOI hit its resistance at RM 5.50 on the 14th of August, and price retreated as a technical correction. Despite a rebound in early September, price failed to break above the RM5.50 level, and resisted by RM 5.40 level, forming the L1 resistance line.
As shown on chart 2, the T1 and L2 line is actually forming an Ascending Triangle, and an Ascending Triangle suggests that price is still in an uptrend, but temporary being resisted, and consolidating. Nevertheless, should price rebound from the T1 line, it would be a buy signal with the T1 being a trailing stop reference, and for investors who had already bought, the uptrend is still favorable, thus they can still hold their positions. However, if price should resisted by the L1 line again, it can be a signal to consider partial profit taking (selling 1/3 of your positions) if you should feel uncomfortable.
The worst scenario is that price failing to rebound from T1 and breaking below the T1 uptrend line. This would mean that the uptrend has come to an end, thus a signal to take profit or to cut loss. Technically, RM 5.00 and RM 4.70 are the next support levels, while the T1 line is still the dynamic support for IOI.
Latest Financial Summary as at 30/6/2009：
| PER | 31.71time | Dividend Yield | 1.52% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 30/06/2009 | 8sen | 1.57% | 6.74% |
| 30/06/2008 | 17sen | 3.56% | 15.22% |
| 30/06/2007 | 7sen | 1.33% | 16.55% |
| 30/06/2006 | 43.5sen | 3.04% | 13.81% |
| 30/06/2005 | 35sen | 3.33% | 14.86% |
Table 1: IOI Financial Summary.
SIME
Chart 3: Sime – 4197, chart from 16/06/2009 to 08/10/2009.
Since rebounding from its lowest point in November, 2008, price of Sime has formed an uptrend. Despite many technical corrections and consolidation, price resumed its uptrend movement. As shown on chart 3, price of Sime broke above the RM 8.40, breaking a new high. As indicated by A, currently, price of Sime is now consolidating as the Bollinger Bands is contracting. This shows that the price is also preparing for a new movement.
When the Bollinger Bands re-expands, it would be a signal suggesting an end to the consolidation, and a beginning of a new movement. And the direction of the new movement shall be determined by the relative position of price against the Bollinger Middle Band. If the Bollinger Bands should expands with price above the Bollinger Middle Band, it would be a bullish signal. Thus, a buy signal, with the Bollinger Middle Band as the trailing stop reference. However, if the Bollinger Bands should expand with price below the Bollinger Middle Band, it would be a bearish signal, thus investors should consider taking profit or cut loss. Resistance for Sime is now at RM8.64, while the supports are found at RM 8.10 followed by RM 7.77 WinChart Automatic Fibonacci Retracement.
Latest Financial Summary as at 30/6/2009：
| PER | 22.61 times | Dividend Yield | 2.37% |
| Dividend | Dividend Yield | Net Profit Ratio | |
| 30/06/2009 | 20 sen | 2.46% | 7.35% |
| 30/06/2008 | 49sen | 7.60% | 10.32% |
| 30/06/2007 | 30.20sen | 3.11% | 7.26% |
| 30/06/2006 | 26sen | 5.45% | 5.56% |
| 30/06/2005 | 26sen | 4.48% | 4.30% |
Table 2: Financial Summary of Sime.
Conclusion:
Generally, plantation stocks are favorite of many fund managers, and therefore, provided that the market (KLCI) is still trading above the 200-day Moving Average line, plantation stocks still the major theme for the KLCI uptrend. Meanwhile, if the CPO could rebound from the 2000 support level, it would be a positive element for the plantation stocks.
No doubt, IOI and Sime are two of the most notable plantation stocks, but still there are many other plantation counters related to the CPO, and investors can apply the above studies to similar counters and decide on their investment plan, and carefully calculate the maximum risk or trading.
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